Abstract

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Citations (24)

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We investigate the empirical relation between corporate governance and stock market liquidity. We find that firms with better corporate governance have narrower spreads, higher market quality index, smaller price impact of trades, and lower probability of information-based trading. In addition, we show that changes in our liquidity measures are significantly related to changes in the governance index over time. These results suggest that firms may alleviate information-based trading and improve stock market liquidity by adopting corporate governance standards that mitigate informational asymmetries. Our results are remarkably robust to alternative model specifications, across exchanges, and different measures of liquidity.

Date posted: June 11, 2008
; Last revised: May 31, 2009

Suggested Citation

Chung, Kee H. and Elder, John and Kim, Jang-Chul, Corporate Governance and Liquidity. Journal of Financial and Quantitative Analysis (JFQA), Forthcoming. Available at SSRN: http://ssrn.com/abstract=1142975

Contact Information

Kee H. Chung (Contact Author)

State University of New York at Buffalo - School of Management ( email )